Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284186 
Year of Publication: 
2023
Series/Report no.: 
Cardiff Economics Working Papers No. E2023/24
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
We study resource misallocation by explicitly modelling R&D input and knowledge spillovers. The effects of R&D and spillovers on firm-level productivity are extensively studied in applied work, but not in the context of resource misallocation. We establish that, in the presence of spillovers, efficient resource allocation requires that more productive firms face higher R&D input prices. Analysing UK firmlevel data, we find that the output gains from correcting misallocation are greatly overestimated when spillovers are ignored. Output losses due to capital distortions dominate those from labour and R&D inputs. Adopting a wrong R&D policy could lead to significant output losses.
Subjects: 
resource misallocation
productivity
R&D spillover
the UK manufacturing firms
JEL: 
D24
D61
O30
O47
Document Type: 
Working Paper

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